The German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, or LkSG) which came into effect this year, represents a significant development in corporate responsibility and supply chain management. The law obliges German companies to conduct due diligence on their supply chains and to take necessary measures to identify and minimise human rights and environmental risks.
To comply with the German Supply Chain Act, German companies will extend due diligence obligations to their Indian suppliers.
The implications of the German Supply Chain Act for Indian companies are noteworthy and will require Indian companies to adapt in order to maintain or build business relationships with their German counterparts.
It will be necessary for them to enhance their supply chain transparency, strengthen their due diligence processes, and take proactive steps to resolve any potential issues. Conducting comprehensive risk assessments, implementing robust monitoring systems, and cooperating with stakeholders may be required.
Due diligence compliance may present challenges for Indian companies
Companies may face increased costs associated with compliance measures, such as capacity building and monitoring their own supply chains. Additionally, the LkSG may lead to stricter contractual requirements from German companies, requiring Indian suppliers to meet specific standards and undergo regular assessments. Failure to meet these obligations could result in the loss of business opportunities with German partners.
LkSG compliance can offer Indian companies certain advantages
By demonstrating a commitment to ethical and sustainable practices, Indian companies can enhance their reputation, attract socially responsible partners, and gain a competitive edge in the global marketplace. Furthermore, companies that align with the LkSG can better mitigate the legal and reputational risks associated with non-compliance.
In order to navigate the implications of the Act, Indian companies need to educate themselves proactively about its requirements and be prepared to address potential challenges.
To support the Indo-German Business Community in this endeavour, we have developed FairVoice, our pilot grievance mechanism, in cooperation with Alliance for Integrity, which works in accordance with the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, LkSG).
With this platform, large German and EU companies, their Indian subsidiaries, and their Indian suppliers are connected by one unified whistleblowing and complaint system.
If your company is interested in signing up for FairVoice, please click here to apply or write to us at sustainmarkets(at)indo-german.com to know more.
Participation is free of cost, limited seats available!